Love, Superintendent of Banks v. Rogers

• Decision Date: 27 November 1933
• Docket Number: 30864
• Citation: 168 Miss. 1,150 So. 815
• Court: Mississippi Supreme Court
• Parties: LOVE, SUPERINTENDENT OF BANKS, v. ROGERS

150 So. 815

168 Miss. 1

LOVE, SUPERINTENDENT OF BANKS, v. ROGERS

No. 30864

Supreme Court of Mississippi

November 27, 1933

Division B

1. BILLIS AND NOTES.

Assignee of notes which bank held as collateral acquired no better title than bank which held notes as pledgee, where assignment was made after maturity.

2 PLEDGES.

Pledgee of commercial paper is trustee for pledgor, and, unless expressly authorized so to do, cannot discount paper at less than its face value or transfer it for compromise amount to person with notice or equivalent thereof.

3 PLEDGES.

Burden to show authority of pledgee of commercial paper to dispose of it at less than its face value rests upon him who asserts validity of pledgee's action in so disposing.

4. BANKS AND BANKING.

Where payee bank deposited notes with pledgee bank as collateral and pledgee discounted notes to maker after maturity for less than their face value, payee bank held entitled to apply maker's deposit therein to balance of notes, in absence of proof respecting pledgee's authority to discount notes for less than their face value, or what accounting pledgee made to payee.

HON. R E. JACKSON, Chancellor.

APPEAL from chancery court of Bolivar county, HON. R. E. JACKSON Chancellor.

In the matter of the liquidation of the Bank of Shelby in charge of J. S. Love, Superintendent of Banks, wherein J. T. Rogers filed petition praying for payment of dividends on his deposit. From an order sustaining his petition, liquidator appeals. Reversed and remanded.

Reversed and remanded.

D. G. Griffing and E. B. Taylor, both of Shelby, for appellant.

The petitioner, Rogers, has placed himself squarely upon the sole proposition that he holds the notes and trust deed marked "Satisfied and Cancelled," without making any explanation thereof or by showing the authority of the pledgee to make such pretended settlement or compromise with him and as to why the interest of the bank in liquidation and its creditors should be defeated. The bank in liquidation on the other hand relies upon the fact of its legal ownership of the notes and trust deed, and its right to make set-off against the deposit claim of the petitioner.

4 Pomeroy's Equity (2 Ed.), p. 3796; Chipley State Bank v. McNeill (Fla.), 82 So. 292; Jones v. Central Hanover Bank & Trust Co. (Fla.) 147 So. 895; Moreland et al. v. People's Bank of Waynesboro, 114 Miss. 203, 74 So. 829, 830; Deer Island Fish & Oyster Co. v. First National Bank of Biloxi, 146 So. 116.

The mere fact that the notes and trust deed of the petitioner, J. T. Rogers, had been pledged with the Union Planters National Bank & Trust Company by The Bank of Shelby, did not and has not in any manner affected the rights of The Bank of Shelby, or The Bank of Shelby in liquidation, as such, The Bank of Shelby is the owner of such notes and trust deed subject only to the rights of pledgee.

3 Pomeroy's Equity (4 Ed.), p. 2951; 3 Pomeroy's Equity (4 Ed.), pp. 2954, 2955; 21 R. C. L., p. 649; McLemore v. Hawkins, 46 Miss. 715; Echert v. Searcy et al., 114 Miss. 150, 74 So. 818; Schaeffer v. Ruden, Superintendent of Banks et al., 246 N.W. (S. D.) 105.

The mere fact that the petitioner, J. T. Rogers, obtained possession of the notes and trust deed and had same marked paid, and procured the cancellation of record thereof, is of no avail to him under, the circumstances in this case.

McLemore v. Hawkins et al., 46 Miss. 715.

As from the record in this case it is conclusively shown that the petitioner, J. T. Rogers, was indebted to The Bank of Shelby at the time it closed, and that the notes and trust deed evidencing and securing his indebtedness were pledged with the Union Planters National Bank & Trust Company, and there is, we believe, nothing in this record which would show that the Union Planters National Bank & Trust Company had any other or additional rights to the notes and trust deed of the petitioner than an ordinary pledgee.

Greek P. Rice, of Clarksdale, for appellee.

The burden of proof of establishment of equitable set-off in this case is upon the defendant, who is the appellant here.

Griffith on Chancery Practice, p. 557; Poull v. FoyHays Construction Company, 159 Ala. 453, 48 So. 785; Barnum v. White, 128 Minn. 58, 150 N.W. 227, 151 N.W. 147; Blakely v. J. Neils Lumber Co., 121 Minn. 280, 141 N.W. 179.

The mutual indebtedness within the contemplation of the statute is not only one that is mutual as to parties, but there must have been also a mutual dealing so that each became indebted to the other.

Canal Commercial Trust & Savings Bank v. Brewer, 143 Miss. 147, 108 So. 424; Kershaw v. Merchants Bank of New York, 7 Howard 386, 40 Am. Dec. 70; Griffith Chancery Practice, p. 557; The State ex rel. v. Banks et al., 66 Miss. 431; Vanzant v. Shelton, 40 Miss. 332.

The burden of establishing this set-off, its right, its amount, and its equity, was upon the original defendant, who is the appellant here.

Cain v. Mayse, 71 Miss. 653, 15 So. 115; O'Neal v. Curry, 134 Ala. 216, 32 So. 697; Stringfellow v. Nowlin Bros., 157 La. 683, 102 So. 869; Holmes v. McKennon, 120 Ill.App. 320; Hollander v. Farber, 102 N.Y.S. 506; Minor v. Kalamazoo Company, 155 Mich. 441, 119 N.W. 589; Powder State Bank v. Huddleston, 74 Ore. 191, 144 P. 191; J. I. Case Threshing Machine Co. v. Hamilton, 55 Mont. 276, 176 P. 152.

Appellant having divested itself of ownership and possession of the promissory notes of appellee, it cannot maintain set-off with such indebtedness as its basis.

Section 2715, Mississippi Annotated Code of 1930.

There is no suggestion in this record that the transaction between the Union Planters National Bank & Trust Company of Memphis and Mrs. G. S. Rogers was founded in or contaminated with fraud. She, being the holder and claiming ownership by and through the Memphis Bank, took the instruments as a holder in due course for value without notice.

A negotiable instrument payable to bearer can be and is negotiated by delivery. The notes in the instant case were bearer notes. In addition to this possession we find the identical notes sought to be set up as set-off bearing the endorsement in blank of the appellant. This endorsement, of course, was all that was necessary to transfer title to the note to Mrs. Rogers.

Civley v. Williamson, 112 Miss. 276, 72 So. 1008; Phoenix National Bank v. Sausier, 102 Miss. 293, 49 So. 91; First National Bank v. John McGrath & Sons, 111 Miss. 872, 72 So. 701.

None of the authorities cited by appellant are in point and tenable here. All of the text citations alluded to by appellant concern themselves strictly with the relationship of pledgor and pledgee and deal with the correlative right of redress of the pledgee against the pledgor for wrongful transfer or conversion of hypothecated securities.

A wrongful or voidable sale by the pledgee can be ratified and made valid and legal by the acts of the original pledgor.

Barnett v. Dowdy, 93 So. 638; Warner v. Powelson, 240 F. 628; Heinze v. McKinnon, 205 F. 366; Hayward v. Elliott National Bank, 96 U.S. 611; Ware v. Russell, 57 Ala. 43, 29 Am. Rep. 710.

The rule goes...